Question

Shelia purchases $50,000 of newly issued Gingo Corporation bonds for $45,000. The bonds have original issue discount (OID) of $5,000. After Shelia amortized $2,300 of OID and held the bonds for four years, she sold the bonds for $48,000. What is the amount and character of her gain or loss

Answer 1

Answer: $700

Step-by-step explanation:

To solve the question, first, we have to calculate the adjusted basis of the bond and this will be the addition of the issued price and the ammortized bond. Therefore, adjusted basis will be:

= $45,000 + $2,300

= $47,300

Then, we will calculate the gain that's gotten on the bond sale. This will be the difference between the sales price and the computed adjusted basis.

= $48,000 - $47,300

= $700